Global oil prices soar

World oil prices surged nearly 3% on Thursday as dealers fretted over a petroleum supply crunch in the United States, the world's biggest oil consumer.

21 Aug 2003 21:00 GMT

The coming weeks will see a surge in demand for petrol

New York crude futures settled up 84 cents to $31.88 a barrel, tracking a more than nine cent spike in oil futures to $1.0993 a gallon, just below a nine-month record hit midday. In London, benchmark Brent crude jumped $1.09 to $29.93 a

barrel.

The US faces the lowest petroleum supplies since November. This has occurred less than two weeks ahead of the Labour Day holiday weekend, when a record number of drivers are expected to hit the roads for vacation.

Fuel outage

The surge in futures prices is bad news for consumers already suffering fuel lines in Arizona after a pipeline outage, and a spike in pump prices in the Midwest after last

week's blackout forced seven refineries in the Midwest and Canada to shut down.

Futures prices began their rally on Wednesday after US government data showed a fall in overall crude stocks and also in petrol supplies to their lowest levels in nine months.

The price rally gained momentum on Thursday as refinery problems in the US and Europe stoked concerns about low inventory levels.

Last week's massive power outage in North America led production to be halted at seven refineries.

Most of those refineries have since resumed production, but on Thursday traders were concerned about a series of refinery problems in California and an outage in a pipeline supplying petrol to Phoenix, Arizona.

A record 28.2 million US travellers are expected to motor more than 80 km by car on the coming Labour Day weekend, up 2.2 percent from last year.

-American Automobile Association survey.

"Gasoline seems to be the order of the day," said Tony Machacek of Prudential Bache brokerage.

An official at the Energy Information Administration, the statistics arm of the US Department of Energy, said petrol demand has been reaching record levels as people have continued to avoid flying since the September 11 attacks.

"People are driving like crazy," the official said.

A record 28.2 million US travellers are expected to motor more than 80 km by car on the coming Labour Day weekend, up 2.2% from last year, according to a survey by the American Automobile Association.

Overall US crude stocks have remained below year-ago levels for months following supply disruptions from producer nations Iraq, Venezuela and Nigeria.

Many in the market are resigned to Iraqi oil exports probably not returning to pre-war levels in the near future as attacks on oil pipelines and power lines have hampered efforts to restore supplies.

Traders are also nervous about political tensions in Venezuela, another vital supplier of crude to the US, where opponents of President Hugo Chavez have called for a referendum on his rule.